USA’s S&P 500 has grown by 68.95% over the past 5 years. Japan’s NIKKEI has gained 38.72% while Germany’s DAX 40 has grown by 12.83% in the same period.
What if there was a way to tap into the growth of these global markets right from the comfort of your home in India? Turns out, there is a simple solution in the form of international mutual funds!
What Is An International Mutual Fund?
An international mutual fund is an equity fund that invests in a basket of foreign stocks. This is generally done through offshore mutual funds that operate in the USA, Europe, Japan, and more.
Global markets are known to grow at varying rates. That’s what international funds look to leverage and have historically generated 12-16% returns over the long term. That’s not all.
Generally, buying global stocks is a complicated process which involves LRS and other formalities. International funds allow you to negate this red tape and add foreign stocks to your portfolio in a simple manner.
Best International Mutual Funds In 2023
Investing in an international fund generally means that you’ll be able to access an index worth of stocks. However, you’ll still have to invest in an international fund that’s suitable for your financial goals.
Cube makes this process easy by giving you access to expert advice from Wealth First, a mutual fund expert who’s been in the game for 20+ years. Here are the best international funds for 2022 on Cube.
PGIM India Global Equity Opportunities Fund
Franklin India Feeder - Franklin U.S. Opportunities Fund
Edelweiss Greater China Equity Off-shore Fund
Motilal Oswal Nasdaq 100 Fund of Fund
Reasons To Invest In International Funds?
1. Potentially High Returns
Well-established markets like the USA and Europe are known to generate consistent returns while emerging markets like China and Japan have been growing at a solid pace over the past few decades.
International funds allow you to tap into this growth led by iconic stocks like Apple, Amazon, Google, Microsoft, and more. In the process, the best international funds can generate 12-16% returns in 5+ years.
2. Global Diversification
Global markets need not necessarily fall at the same time. This principle can act as a hedge against domestic volatility. For example, Nifty has lost close to 2% over the past 6 months while FTSE 100 gained more than 4%.
Furthermore, owning a bunch of international stocks means that you can diversify your portfolio within and across categories of foreign countries. Take S&P 500 as an example.
An international index fund that tracks it will give you access to 500 of the best US stocks from the world of energy, finance, healthcare, Information Technology, and more.
Individual international stocks on their own may be relatively expensive to buy. But international funds allow you to access a basket of international stocks for as low as ₹5,000. Want to know more? Download Cube.
Risks Involved In International Mutual Fund Investments
1. Global Risks
International markets have been known to be affected by various factors like a breakdown of trade relations, inflation, political instability, and others. That’s why international funds are classified as risky investments.
But if you have the right advice at your disposal, you’ll be able to navigate the volatility. Cube gives you access to this with a combination of expert advice and assistance from trained professionals. Tap to know more.
2. Potentially High Volatility
Even if you’ve invested in stocks that are of companies operating miles away, they’re highly likely to be prone to volatility. That’s just how stocks are in the short to medium term regardless of the country.
That said, international stocks have the potential to generate potentially high returns in the long term. The key is to know your risk level and choose an international fund accordingly. Watch this video to know more.
3. Over Diversification
As an investor, you’ll make or come across common mistakes. For example, buying several international funds and over diversifying a portfolio. This can lead to higher fees.
Another example is buying too many international funds with the same portfolio. This can lead to an investor under diversifying their portfolio. Avoid these mistakes by getting curated recommendations here.
Taxability Of International Mutual Funds
Believe it or not international mutual funds are treated as debt funds during taxation. You’ll have to pay a tax on Short Term Capital Gains (STCG) if you hold the international fund for less than 3 years.
STCG is taxed as per the investor’s I-T slab. You’ll have to pay a tax on Long Term Capital Gains (LTCG) if you sell the international fund after 3 years. LTCG is taxed at 20% with an indexation benefit.
Note: Facts & figures are true as of 05-06-2022. None of the information shared here is to be construed as investment advice. Exercise caution when investing in assets like stocks, mutual funds, alternative investments, and others.
Curious about personal finance and all things money. Can either find me reading a book or dancing to a tune.
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